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Facilitating Strategic Planning for Social Impact

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Over the last few months, I have posted a series of articles on strategic planning for  nonprofit and social sector agencies. Not surprising, a number of potential client calls are from folks  looking for facilitation and process support for strategic planning.  Indeed in this anemic economy, many nonprofit agencies find themselves refocusing on strategy.  Many initial conversations with clients fall into one of three groups.  The  first group are those agencies who have been through strategic planning “dutifully” every 3-5 years as “every good nonprofit agency does” and now it that time when the planning cycle has looped around.  The second group are those agencies that have read one or more books on strategic planning or have participated in an onerous planing process and feel daunted by the process.  The third group are agencies who may have been severely impacted by the recent economic downturn and are truly looking for fresh ways to think about how to move forward. While all three groups may have different motivations and perspectives related to  strategic planning, all  share in common a desire to improve the social impact of their organizations.

Based on literally dozens of conversations with nonprofit leaders, I find that many organizations are looking for a simpler framework for strategic planning.  In this post, I want to outline a strategic planning process that is versatile enough to guide an organization or team as they seek to engage in the thoughtful work of strategy.   In summary, the framework that I most often follow, is the process of 1) establishing the critical social need, 2) creating a compelling vision of how your agency can create a positive social impact by addressing that social need, 3) developing a relevant organizational mission, 4) developing system’s focused program strategies, and 5) creating measures and  outcomes to guide the plan implementation.

Establishing the Critical Social Need:  Every nonprofit should exist only in response to an unmet critical social need.  Unlike the private sector where the market may support companies selling consumables that may have little value, no value, or even a negative value, the nonprofit sector can only afford to support organizations that are positively impacting compelling social needs.  As a result, strategic planning begins by defining the unmet social need.  Such a community needs assessment can be based on existing data, expert opinion, surveys, a systematic environmental scan, or ideally some combination of these data points.

Creating a Compelling Vision of Tomorrow:  I have written before about the relationship between vision & mission and critical social needs.  Within the nonprofit sector and the philanthropy community that supports the nonprofit sector, there is an increasing trend towards defining and working towards a compelling social impact.  The focus on social impact makes it  increasingly less tenable for agencies to simply run “good programs” without creating social change. In this context of strategic planning,agencies should ask themselves, “what is the better, more just, and equitable tomorrow we are tying to create?”  A vision, in essence is the BIG WHY that defines the reason for the existence of an organization.

Developing a Relevant Mission:  An agency’s mission statement should represent a the “tactical  orientation of the organization that is closer to the social need being addressed address.   The questions that get to the heart of an agency mission might include ones such as: What programs and services is our agency trying to excel at?  What qualities of culture and community are we seeking to create?  How do we want to be known in the community? If folks seek us out, what are they seeking us out for?  By creating a clear mission you are answering the fundamental questions of the “What and How”  of the agency.

Designing System’s Level Strategies:  In between your vision of tomorrow and the mission you declare today is the “white space” of programs and services.  Strategic plans are not intended to the entirely fill the white space by fully designing programs  but rather is the space where an organization declares its commitment to strategies designed to create its vision of tomorrow.   The strategy “challenge” is to think systematically and systemically about the opportunities to foster change at the individual, community, and policy level to create a synergistic effect that magnifies the benefits of each individual program. It is also important for an agency to develop capacity strategies that will grow the organization’s ability to create a larger social impact.  For many organizations that implement “programs” the shift to thinking about community impact and public policy can be an exciting process of discovering new potential.    Indeed, the creative energy of designing solutions to compelling social needs has the potential of giving renewed inspiration and aspiration to an organization.

Creating Performance and Outcome  Measures:  It is only worth the time and energy to create a strategic plan if an agency is willing to ensure that the document is living, breathing and is used as the organizational compass guiding and anchoring decisions.  Ideally, as program strategies are created, the organization also takes time to establish  corresponding performance and outcome measures.   Answering the question of how an agency will monitor progress toward the objectives should be integral to strategic planning.  Similar to developing program strategies, the purpose at this level is not to create the actual performance measurement system (i.e., dashboard or report card) but to establish the benchmarks that will help provide assurance that the agency activities will stay focused on the strategic design. Later you can fully develop programs and outcome measurement more precisely based on further study and design.

I purposefully presented in this post a simplified strategic planning process. Unfortunately, on more than one occasion, I have seen (and heard from frustrated potential clients) how an overly complex process of strategic planning gets in the way of successful strategic planning.  Too often the textbook approach to strategic planning is cumbersome and emphasizes precise sequential steps, prescribed analysis measures (i.e., SWOT), meaningless revenue projection exercises and other artificial exercises that constrain thinking.

Don’t get me wrong, I believe that strategic planning is a process that requires intentionality, reflection and analysis –none of which are easy. However, I am a firm believe that social sector strategic planning requires a simpler more aspirational framework as represented by the five slightly imprecise and  iterative steps identified above.  Unlike a standardized corporate strategic planning approach Nonprofit and social sector agencies requires a social impact planning model that can dynamically address a wide range of social needs and accommodate a variety of organizational cultures.

A strategic plan that reflects the process from need to to vision and offers specific strategies and measures to guide implementation, will establish a framework to help an agency achieve success.  To be useful in creating such a strategic plan, a facilitator needs to, as Simon Sinek (external link), so clearly articulates create a compelling why, a disciplined how and a consistent what.  Applied to a strategic planning framework it suggests that a simplified approach to strategic planning coupled with a systemic facilitation process can assist nonprofit agencies to improve the social impact of their organizations.

As always, your thoughts are welcome.


Facilitating Beyond the Crisis in Thinking

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Typically, my posts try to capture original thoughts related to facilitation and process.  This week, however, has been one of rich discovery and learning from the words of others.  In this post, I am lacing together the knowledge of others in a synthesis of ideas to reinforce my practice foundation of process design and facilitation.  I hope you enjoy the related links embedded in this post. –m

This week I had the privilege of attending a community lecture for regional Arts organizations by Michael Kaiser, President of the Kennedy Center.  His topic was the economic challenges being faced by arts organizations and framed the lecture as the Arts in Crisis.  I went into the packed theatre expecting to hear the fairly familiar terrain that corporate donations are down, retaining major donors is more important than ever, diversifying your funding base is critical, and board involvement is key.   Some of that familiar ground was covered but Kaiser left the road and rose like a kite into the air. He first caught the gentle breeze and higher up leaped onto the mighty winds.  While he never directly said it, his is message was clear.  The crisis in Arts Organizations is not an economic crisis but it is a “crisis in thinking” and leadership.  He argued that strength and stability during these challenging economic times comes through transformative creativity and not through cutting budgets (For an awesome summary of the entire presentation check out Lisa Radon’s excellent blog).

As a performance improvement facilitator who works with a wide range of nonprofit agencies, I have seen this “crisis in thinking” over and again. Many nonprofit agencies are in their second and third consecutive years of budget cuts. Increasingly stressed staff (who can vaguely remember the concept of pay raises or benefit increases) are being asked to do more and more with the proverbial less and less. The gap between service costs and traditional revenues continues to widen and the compounding effects of sequential years of consecutive 3, 4 or 5% budget cuts are fracturing the integrity of many organizations.  Senior management and Boards of Directors in these organizations are becoming equally fatigued by constantly responding to an anemic resource environment.  So it is understandably challenging to walk into an organization and say, “stop trying to defend the gains you have made and start thinking using transformative creativity.” Yet this is the critical message for the nonprofit sector today.  Trying to reduce your way fiscal health undermines the organizational core and is the equivalent of burning your furniture to keep warm.  Unless you have lots and lots of furniture, in the end, you will be both cold and have nothing to sit on.

At the same time, I am not suggesting that conservative management of expenses is imprudent.  Indeed, I have seen innovative nonprofit agencies, gain efficiencies by renegotiating leases on space and/or equipment, outsourcing back office functions, and redesigning technology expenses at a considerable savings.  However, there comes a time and place where program effectiveness and, more importantly, the larger social impact of an agency is undermined by a myopic and relentless focus on reduction.  A theme that continues to serve my clients well is that success looks beyond the crisis at hand and stakes out ground in the future social impact of the organization. As I have written before, envisioning social impact requires intentional design of the “tomorrow” that an agency wants to create.

Helping nonprofit organizations get beyond the “crisis in thinking” requires a facilitator to work with teams across several domains that include the following:

Focus on Participatory Leadership:  My guess is that is that if I searched the web for the term participatory leadership, I would find that some consulting group has probably trademarked the concept.  However, what I refer to is not something out of a box or training program but is a the commitment to the ongoing study of leadership from the perspectives of vision, equity, culture.  Transformative creativity (or getting beyond the crisis) requires a compact between the layers of an organization where there is cooperative ownership, participatory systems and a learning culture.  I was recently reading a study by McKinsey & Company on successful transformations that described the critical role of balancing top down leadership with a culture of participation, equity and ownership across the staff and board.  Such cultures need to be seeded as a “big idea” and then cultivated by skill development and supporting systems. Indeed, I have facilitated more than one board-staff retreat where the primary outcome was to begin the development of a participatory culture.

Focus on Outcomes:  One of the revolutions within the nonprofit sector and philanthropy is a growing discontent with producing good results.  Philanthropists and leading nonprofit organizations want to make a larger social difference.  The coming wave of change (that will swell to a tsunami) is an increasingly myopic focus on social impact and outcomes rather than program impact.  This week I read a fantastic article by the Board Chair of Venture Philanthropy Partners (this article is the third article in a series he has been writing). In this article he minced no small words as he wrote: “Let me say this as bluntly as I can to nonprofits and funders alike: The challenge of managing to outcomes has little to do with systems, processes, or technology. The real challenge is that organizations cannot hope to manage to outcomes unless they have in place an engaged board; leadership with conviction; clarity of purpose; and a conducive, supportive performance culture.” The organizations of tomorrow are those who are focusing on creating social change that is larger than the results generated by programs.  A focus on outcomes asks, “How can we create a sum that is greater than the total of our parts?”

Focus on Mission, Vision and Margin: In my last post, I detailed the concept of mission and vision in strategic planning and in creating social impact models.  The point that I was making in that post was was underscored in an article on the Acumen Fund’s blog that discussed the role of mission, margin and mandate as levers to scale interventions and create social impact.  If you want a much lengthier discussion on the relationships of these concepts, I highly recommend the study of the book Strategic Giving: The Art and Science of Philanthropy by Peter Frumkin.  While I will warn you that Frumkin’s book is over 400 pages, it provides a depth of understanding about social impact and is a must read for any organization serious about transformative creativity. By focusing on the larger vision and placing mission and mandate in the context of a clear vision, organizations will, by default, move into strategic thinking rather than crisis thinking.

Organizations in the social sector face unique challenges in this lackluster economy.  Agencies that are focusing on defending their core also need to make room to think about how to increase capacity and effectiveness.  In seeking to navigate the twin challenges of maintaining and being strategic, facilitators need to realize that leadership, outcomes and the design process (in between the leadership and outcomes) comprise the foundation for transformative creativity.

Facilitating a High Performing Board

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Recently, I have been working on several different projects that involve nonprofit board development issues ranging from staffing a board, to recruiting board members, and improving the effectiveness of boards.  My recent work has led me to filter my experience through a review of the literature on the characteristics of an effective boards and  strengthening  nonprofit board performance.  So this post is one more installment of my occasional series on nonprofit board development.

As I have written previously, a functional board is comprised of members capable of serving four functions that include 1) governance, 2) capacity support, 3) content expertise, and 4) resource development.  This is a critical framework to understand as it serves as the foundation of a functional board. However, a high performing board requires a different level of operating. High performing boards are based on “the highest and best use” of the talents and skills of board members.  Most nonprofit organizations seek to recruit board members who are talented individuals who are often business leaders, critical thinkers, and community activists. Unfortunately, more often than we would like to admit, the use of such  talented board members is limited to review of policies and procedures, looking over budget reports for accuracy and assisting in fundraising events. While such board activities might define some of the duties of a functional board, a high performing board is defined by engagement in ongoing strategic thinking and strategic action. Reviewing meeting minutes, agency financial reports, and blessing changes in HR policy are necessary duties of a Board but if the balance of board meetings is consumed with such pedestrian administrative tasks, then the “highest and best use of board talent “is likely missed.

A classic Harvard Business Review article published over a decade ago, suggests that high functioning boards, discover, focus and organize around “what matters” (External Link).  According to this article, what matters is “harnessing the collective efforts of accomplished individuals to advance the institution’s mission and long-term welfare.”  It goes on further to suggest that the board’s contribution is meant to be strategic, “the joint product of talented people brought together to apply their knowledge and expertise to the major challenges (and I would add, opportunities) facing the institution.”  So, if this is the description of a high performing board, what does it take to create such a board?  From my experience and a review of the literature, I would suggest five starting points.

Assess where you are and define where you want to be.  The first task of developing a high performing board is to figure out where are the gaps in performance.  A Google Search will unearth several board self-assessment tools that range from overly simplistic to overly complicated. Such tools might be useful to help a board think about its governance functions, member commitments, or help identify “holes” in a board’s operating structure.  Such a self-assessment can be a good place to benchmark the strengths of your board operation but many of these assessments do not have a strong strategic intent.  An alternative assessment would be to benchmark practices against the variables presented in the Grant Thornton 2009 National Board Governance Survey for Not-for-Profit Organizations (External Link).  In my opinion, this survey offers a timely and more strategic perspective on board operations. A third approach to assessment is to shift away from a narrow assessment of the board and conduct a larger capacity assessment.  I have written elsewhere about capacity assessments and in that article I linked to a useful assessment spreadsheet (External Link).  A capacity assessment would help the board not only reflect in its strengths and opportunities but would also be useful in discovering the “what matters.”  Whichever route you take, knowing where the board is now will help identify the performance gap related to where you want to be.

Build the Board’s Skills:  I have argued before that board development starts at a board orientation but continues as an ongoing process of raising the skills and competencies of board members.  The reality is that board members become effective as they engage their heads, hearts and hands in the work of the organization.  To me, this calls for a meaningful development agenda that includes a) ongoing board training on topics related to governance and strategy, b) opportunities for boards to get their “hands dirty” in the work of the organization, and c) learning about the larger service context in which the nonprofit agency works.  Building board skills is a strategic and long-term process that is not segregated into an annual or semi-annual training event.  Ideally, participating in a strategic agenda for board skills building should be built into board practices and be built into the expectations of board service.

Engage Strategically:  A simple yet useful exercise to help gauge the strategy of a board is to do a quick content analysis of two sources.  First, examine the pre-meeting packets sent out to board members for the last three or four months and sort the contents into the two piles of administrative and strategic.  Second, review the meeting minutes for the same time period and highlight everything that is strategic in yellow.  The balance of the piles and the presence or absence of yellow highlights will give a board a good indication of how much of the board’s time is spent in administrative review and how much of the time is spent engaged in strategy.  The second part of the exercise is to ask the question, how much of the historic content was actually dependent upon face to face meeting?  For example, could board members review and approve fiscal statements and other administrative approvals after a simple review of emailed documents?  The answer is likely to be yes.  I am not suggesting that boards should conduct business by email rather I wanted to create a perspective of time.  If board members can read and approve by reviewing email attachments, then the time allotted at board meetings should be proportional. Simple administrative review should be done in advance of meetings and, when there are no concerns about the subject matter, such tasks should take relatively little time at a board meeting. Unfortunately, too many boards are conditioned to process the nuances of organizational administration, mistaking such administrative processing for strategy.  Board meetings need to be oriented around strategy and board members engaged in the work of solving big challenges of the agency and thinking strategically two and three years out.   Performance of boards would improve dramatically if administrative review were limited to a tightly narrated quarter or a third of a total board meeting time.

Measure Performance:  Another starting point for improving board effectiveness is to measure performance.  Too often a board will measure the performance of the agency and neglect measuring their own performance. At best, many boards’ self-performance evaluation is limited to evaluating the start and end time of meetings or the quality of the takeout food served at the event.  High performing boards create meaningful measures of board performance. While it might be tempting to measure performance by attendance, percent of board members donating to the agency, and the on-time completion of the executive director performance evaluation, these are fairly un-strategic measures. Strategic measures go further and might track such benchmarks as the regularity and content of executive or planning sessions, engagement of members outside of board meetings, or the percent of meeting time spent in strategy versus administration. Additional measures might be tracking the time required to recruit skilled board members or membership retention.  For many boards shifting to performance-based board management can represent a sea change in culture and is likely only achieved after carefully facilitated strategic conversations and thoughtful planning.

Get the Right People on Board:  A final starting point is to conduct a thoughtful review of board recruitment strategies.  Does the agency have clear board member job descriptions?  Are members sought out individually for skills and expertise? Do board members invest time in cultivating potential board members?  Many small to midsized nonprofit agency have difficulty staffing their boards let alone staffing their boards with highly qualified community leaders.  Having worked with many such boards, I will not underestimate the challenge of this task.  However, establishing a clear recruitment strategy and creating a meaningful board structure with the expectations of continual learning, performance-measurement, and strategic engagement will become reinforcing cycle that raises expectations and organizational optimism.   Energy and engagement creates energy and engagement.

Developing a high performing board is not a trivial task.  Indeed, I would contend that for many agencies, creating a high performing board may an intentional process that spans a year or more. However, despite the challenges of reinventing a board, facilitating a process to develop a high performing board is critical as nonprofits seek to thrive in the continuing economic uncertainty and instability.  High performing organizations of  tomorrow are those that develop and maintain high performing boards today.

Facilitating Strategic Budget Plans & Resource Development

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For many nonprofit organizations this is time of the year where the board and staff turn their attention to drafting a budget to guide business operations for the next fiscal year.  For many agencies, this annual ritual simply starts with taking last year’s budget and incrementally scaling the numbers up or down depending on the known and likely commitments of funding for the next year.  While this method is reliable when continuity between years is strong, an increasing number of nonprofits are still facing volatile economic environments.  For organizations confronting “revenue uncertainty” cutting and pasting from last year’s budget is likely inadequate preparation for the year, or years, ahead.  Organizations’ seeking not only to survive but thrive need to develop an intentional process to facilitate the development of a long-term budget strategy.  Having many years experience creating and managing budgets in career, consultant, and volunteer positions (across nonprofit agencies of all shapes and sizes) I would like to suggest five elements of a facilitation process that will strengthen a strategic budget planning process.

Define your Funding Model:  It likely comes as no surprise that the agency budget framework for many small to midsize nonprofit organizations is simply the amalgamation of the individual program budgets that have been built in response to specific grants and/or contracts received by organization.  Unfortunately, even some larger organizations fall prey to this “Lego Approach” to budget development.  As new grants, contracts or donations are obtained, the resources are snapped into place to fill budget holes or to expand programs as required by the funding restrictions tied to the new revenues.  Agencies that would raise their hands if asked if they use the “Lego Approach,” would do well to consider convening their board for a strategic conversation about developing an intentional framework to guide the budget process.

In recent years, there have been a number emerging perspectives in nonprofit fiscal management and philanthropy that, taken together, help nonprofits develop a strategic perspective for long-term revenue development.  Several articles and books are referenced at the end of this post, however, some of the key concepts that form the basis of the conversation should include: a) a review of Pratt’s funding archetypes and the ten funding models recently presented in an article in the Stanford Social Innovation Review; b) exploration of revenue autonomy, reliability and concentration, and c) operational overhead.  The goal of this conversation is to develop a working understanding of the concepts and prepare the board to apply these principles to creating a strategic framework for their organization.

Assess your Overhead Costs:  One unfortunate legacy that plagues nonprofit organizations is that efficiency is often measured by overhead cost. The assumption is that nonprofit overhead is a proxy measure of efficiency, in essence, suggesting that the lower the nonprofit overhead costs, the more efficient the nonprofit is assumed to be.  This perspective is reinforced by many funding agencies who cap operational overhead at an arbitrary number (like 8%, 10% or 15%) when awarding grants and contracts.  However, over the last few years several studies have begun to challenge this conventional thinking with a growing chorus of voices suggesting that the antiquated approach to efficiency actually sets up a nonprofit “starvation cycle.”  Creating a strategic approach to resource development and budgeting will require boards to develop an accurate administrative overhead budget. This exploration by the board will need to account for both current administrative costs and costs associated with capital investments that need to be made in such areas as human resource, technology, fiscal, that have been deferred expenses.  The resources listed below offer several good starting places for developing an accurate administrative overhead budget.  Having a realistic understanding the true agency overhead costs will help your organization develop realistic plans to align revenues with true costs.

Value your Staff:   A third component of a strategic budget process is to create a compensation system that values and rewards staff.  Much akin to the under-investing in agency overhead and infrastructure, under-investing in staff is another strategic hurdle that nonprofit agencies need to understand and overcome.  Again, conventional wisdom suggests that nonprofit employees work for intrinsic rather than extrinsic value, which translates into lower salaries and benefits.  Unfortunately, when a critical mass of nonprofit agencies operates under this assumption it creates a market that supports under-compensating staff.  On more than one occasion, I have heard a well-intentioned board member say, “Our employee pay and benefits are at the market rate.” Unfortunately the benchmark should not be “market rate” but should be oriented around the equity of a living wage and incentives that foster the recruitment and retention of high performing employees.  Again, the goal of building a compensation model is to create a resource development goal for an organization that can be supported by intentional objectives to be pursued in a priority sequence.  For example, I know of an agency that laid out a strategic agenda to sequentially develop a living wage structure, strengthen the insurance options, increase retirement contributions and add an employee assistance program and educational benefits.  The organization is supporting this strategy with a specific multi-year resource development plan focused on strengthening compensation.

Start from Zero:  For those organizations locked into program grants and contracts, many budget decisions were established when the grant or contract proposal was submitted. For those programs that have been funded over multiple funding cycles, the budgets (and ideally work scope) have expanded or contracted based on available funds. However, even if a program budget is set, it is a very productive exercise to start from zero and rebuild a program budget.  In other words, suspending the current program budget, if you were to create an ideal budget for the program services being delivered, what would that budget look like?  If staff compensation was fully loaded and the appropriate overhead was charged to the program, how much money would it really take to run the program?  Creating a zero-based budget allows you to compare where you should be (relative to the revenue and expenses) to where you actually are today.  The variances identified are the program budget gaps that are being absorbed or ignored at the peril of your agency’s fiscal health.  Creating zero budget comparisons across program areas would help bring into focus the gaps between revenues and expenses and would become the groundwork for a facilitated discussion about program priorities and where your agency is appropriately investing, over-investing and under-investing in programs that help the organization meet its social goals and objectives.

Think About Governance:  Another part of the process is to be intentional about governance.  At the most basic level, governance asks the big three questions is a) is it allowable, b) is it approved and c) is it something that will advance your mission?  In more detailed thinking about governance, your board needs to create a process to ensure that the budget process protects donor intent, appropriately allocates expenses and ensure the agency’s fiscal and legal advisors review the budget strategy for accuracy and legality.  Finally the governance component of budget planning requires attention to risk management and contingency planning, to minimize disruption of programs and services should budget projections not be met.

Taken together, these five facets of strategic budget planning suggest a staged process that includes:  a) coming to agreement on a funding model for your agency that serves as the organizer for strategy, b) being clear about the true cost of your services, c) recognizing your resource gaps, and d) creating a strategic resource development plan to address the resource gap.  It is important to recognize that re-engineering an agency’s approach to resource development will take time and the first iteration of a strategic budgeting process will likely yield two working documents.  The first document is the strategic resource development plan is a long-term (3-5 years) that defines how your agency will reshape its approach to growing revenue streams over time.  The second working document is the short-term “compromised” budget to address the coming programmatic year that juggles the anticipated expenses with your projected committed and likely revenues.  However, this initial mixed result of “the  pragmatic” and  “the strategic” will only be a temporary stage as the subsequent iterations of the strategic budget process will be oriented more and more toward the strategic goals and objectives of your plan.

What is becoming clear in the social service sector of today is that that nonprofit organizations can’t simply rely on the momentum of the past.  Strategic thinking and systems thinking need to be core competencies of the leadership and boards of nonprofit organizations.  Even as I write this blog, a new resource came through a “tweet” that made this statement, “Leaders who are determined to have their organizations thrive in these new and challenging times must reevaluate their potentially outdated ways of thinking, prioritizing, investing, and acting. (external link)”  For budget planning and the larger concept of strategic resource planning, I could not agree more.

As always your thoughts are welcome.

Resources:

Facilitating a Capacity Building Process

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The economic downturn that occurred in the last couple of years has been unquestionably harsh on most nonprofit agencies.  The increases in service demand, coupled with the decreases in revenues have created organizational strains and fractures that will linger for years to come.  If there is any silver lining to this recent crisis, it is that has it forced many nonprofits to question their very foundations of mission, vision and operation.  In this context, the exploration of capacity and capacity building has increased in prominence and profile across many organizations. To that end, innovative and adaptable organizations are using this crisis to fundamentally rethink capacity and are linking strategy to capacity.

I recently attended a panel discussion geared towards grant makers on the topic of nonprofit capacity building.  The panel discussed capacity assessments, the role of training, coaching and consulting and evaluating capacity building efforts.  As with many lunch presentations there was much more content than time, however, it was interesting to hear the “30,000 foot view” of capacity from funding agencies’ perspectives.   As one who has worked with nonprofits in capacity building for many years, the discussion of tactics by the panel revealed little new information.  However, what was interesting in the presentation was the discussion of the “disconnect in thinking” between funding agencies and nonprofit agencies around the concept of capacity.  The disconnect in thinking can be summed up in this way:  When nonprofit agencies think about capacity building, especially in the context of seeking a capacity building grant, they really are asking for operating support for specific projects.  When grant makers talk about capacity building, they are talking about developing infrastructure.  Adapting an illustration that one participant gave, it is like a vegetable garden where the nonprofit is concerned about a particular plant in the garden and the grant makers are increasingly interested in the root system and soil that supports the entire garden.  In previous posts I have discussed the concept of initiating a capacity building conversation and also discussed capacity building in the context of resource development planning. In this post I want to discuss facilitating an organizational capacity planning process.

Before discussing the process, we first need to define what is meant when we discuss capacity and capacity building. As we are reminded in that now classic primer on nonprofit jargon “in other words,” (external link) capacity is one of those “vague, quasi-occult terms” that evokes the need for outside “expert” consultants who understand the deep mysteries of the concept.  The unfortunate byproduct of such a misunderstood word is that the ambiguity of the term makes the concept of capacity and capacity building seem daunting to an organization.  So as an opening premise, I would like to suggest a clear and concise definition of capacity as “the sum total of the  strategy, management, staffing, infrastructure, resources and operation of an organization.” The process of capacity building then becomes the deliberate assessment and improvement of those core elements of capacity.  The following is a suggested facilitated process for capacity building.

Assessment:  As with most organization development and performance improvement projects, the first step in the process is to take a systematic assessment of where you are right now.  There are several nonprofit organizational capacity assessment tools that can be found with a simple web search.  The grandfather of tools was developed for Venture Philanthropy Partners by the mega consulting firm of McKinsey & Company (external link).  This tool has been adapted by Marguerite Casey Foundation (external link) and has also been adapted by Social Venture Partners International (SVPI) and is available as an Microsoft Excel spreadsheet (external link). Taking the SVP tool as an example the rubric addresses: financial management, fund development, information technology, marketing and communications, program design and evaluation, human resources, mission, vision, strategy and planning, legal affairs, leadership development, board leadership.  Future versions of the SVP tool will address cultural competency and policy advocacy as additional areas.  My experience (and the experiences of a few colleagues) in using the SVP tool has been that the level of depth of the tool may be less relevant for smaller or grassroots organizations.  In these cases, another useful tool to consider is a “Tool for Assessing Startup Organizations” that was designed to be a due diligence supplement for grant makers (external link).  As I suggested, a web search will help identify additional approaches to capacity assessment. The point of drawing attention to several tools is less about “what  tool  to use” and is more about illustrating the need for a framework for systematically assessing your agency capacity.

Once you decide on an approach, implementing a capacity assessment ideally takes a 360 degree approach that solicits relevant input from staff, board, clients, funding agencies and other stakeholders. The wider and more inclusive the process, the wider and more inclusive will be the insights on capacity.  Note:  I would be remiss to point out that online surveys can be an effective way to conduct an assessment.

Dialogue and Planning:  The second stage of a capacity building process to create and intentional dialogue around the findings with three important goals that include: a) creating a shared understanding of where the agency is starting from and where it is going, b) deepening the spirit of community and commitment to strengthening the organization, and c) creating workplans that support capacity building.  While workplan development can be a time intensive process as I have suggested elsewhere I do want to underscore that reflecting on a capacity assessment should also be a time of building community and commitment.  The dialogue and planning process lends itself well to an “intensive” like a board and/or staff retreat, but also could be the basis for a “learning community” process that spans 4-6 months and includes spaces for homework and reflection.

Action:  The third stage of is the action stage of implementing capacity building workplans.  Recognizing that capacity building is an ongoing commitment to continuous improvement, there needs to be the intentional structures to manage and monitor progress over time. Since capacity building is really about improving an entire system is also useful to think of implementation as a series of “rapid cycle tests” using a model such as the Plan, Do, Study, Act (PSDA).  There are a number of good primers for this model online, (external link). Finally, it is important to keep in mind that the action stage will likely taking an agency into new organizational territory and will likely require some investments in the professional development of the agency’s staff and board.

Leverage:  The final step in a capacity building process is to be intentional about leveraging your efforts for capacity building.  This brings us back to my opening discussion of grant makers’ perspectives on capacity building.  The organization that invests in the systematic planning for capacity building is uniquely positioning itself to pursue a capacity development grant.  For example, I know of one agency that received a three-year capacity building grant after taking an entire year to asses and begin to implement a plan to build capacity that the entire board stood behind. Based on the demonstrated movement towards capacity, the agency was well positioned to seek a capacity building grant. A grant-writing acquaintance once stated that when it comes to capacity building grants that funding agencies “want to improve organizations –not rescue them,” and so it is imperative for organizations to start from a position of strength.  I believe that the leverage of capacity building grants is most effective when agencies are already engaged in the forward motion of capacity building.

I recently read a great article titled “On not letting a crisis go to waste: an innovation agenda for Canada’s community sector” (external link) that reinforced the concept that the nonprofit community/social sector is being tempered as we continue to struggle out of the economic recession of the last several years. Implied and stated in the article is that agencies demonstrating vision, leadership, adaptability and innovation are the ones who will not only strengthen themselves but help strengthen and reinvent the social service and community sector.  For many nonprofits this journey of innovation and opportunity begins with an intentional facilitation of a capacity building process.

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